Monday, August 8, 2016

Trump Claims US Has the Highest Corporate Tax Rate

Katherine Krueger covered the Trump economic address noting his lack of honesty. I should say nice job but there was one item that troubled me:

According to Trump, the U.S. has the highest business tax rate among the major industrialized nations of the world at 35 percent, which under his plan would be slashed to no more than 15 percent. Although the country has the third-highest top marginal corporate income tax rate in the world (and the highest among the industrialized nations), the reality is that the money collected is cut significantly by things like tax credits and offshore tax havens. In 2010, the average effective federal tax rate paid by large, profitable corporations was just 12.6 percent, according to the Government Accountability Office.

She is right about how the statutory tax rate in the US overstates the effective rate for many US based multinationals but let’s check her source that alleges two other nations have higher tax rates:

The United States has the third highest general top marginal corporate income tax rate in the world at 39 percent, which is the same as Puerto Rico and is exceeded only by Chad and the United Arab Emirates…the U.S.’s corporate tax rate of 39 percent is the third highest in the world, tied with Puerto Rico and lower only than the United Arab Emirates and Chad, which have rates of 55 and 40 percent, respectively.

The alleged 39 percent rate for U.S. companies again is a statutory rate that many companies do not really face as she has noted. The tax rate in the United Arab Emirates is often zero for companies that are not in the business of extracting oil out of the ground. This 55% rate is actually a surcharge on oil profits. Other nations with lower tax rates than we have also have high surcharges on oil profits. So OK – the statutory rate for profits in Chad is higher than this alleged 39%. Of course the effective tax rate for US based multinationals is often nowhere near 40%. Trump could advocate enforcing transfer pricing if he were serious about raising taxes from the rich but I guess his small government economic advisers have convinced him of the “wisdom” of that Laugher Curve.

1 comment:

Actually the more amusing/ironic story here is that indeed the US has one of the world's higher corporate tax rates, with there being indeed reasonable reasons for lowering to at least the world average of about 25% (do keep in mind that indeed a non-substantial portion of corporate taxes get passed on to consumers, with this depending on market power of the companies taxes, and this issue an old chestnut that has been debated for so long I am almost ready to go to sleep over it until I see this sort of stuff).

The ultimate irony is that Obama proposed cutting the rate to the world average, supported by the vast majority of economists, with cutting this rate one of the most holy of holy long time GOP positions, but the GOPs in Congress just would not could not do it when proposed by the evil Islamofascist Obama, thank heavens.